Samsung forecasts slowing profit growth for Q2, missing analyst estimates

Samsung has put out earnings guidance for its Q2 which indicate quarterly growth at its slowest for more than a year — as a lack of new ideas to sell high end smartphones drags on the company’s bottom line.

The electronics maker is reporting estimated profit of 14.8 trillion Korean won (USD$13.2BN) on revenue of 58 trillion Korean won (USD$51.9BN) for the quarter.

Samsung’s expectation just misses an average estimate of 14.9 trillion won from 18 analysts polled by Thomson Reuters, and shares in the company are down just over 2 per cent on the earnings guidance news.

The Q2 forecast compares to profit of 15.64 trillion Korean Won (USD$14BN) on revenue of 60.56 trillion Korean Won (USD$54.2BN) for its Q1 — when Samsung reported a record operating profit off the back of growth in its semiconductor business plus the early global launch of its flagship Galaxy S9 smartphone.

Despite that Q1 high, it had prepared investors for a Q2 slowdown — warning in April of challenging conditions ahead, citing weakness in the display panel segment and a decline in profitability on the mobile side, amid rising competition in the high-end smartphone segment.

At the same time, the global smartphone market is shrinking — even in China, the erstwhile growth engine for smartphones after Western markets saturated. So Samsung’s smartphone business is facing a dual squeeze from shrinking sales opportunities and rising competition from the likes of China’s Huawei and Xiaomi — two rival Android device makers that have been carving out additional marketshare.

Meanwhile, Samsung’s main rival for high end smartphone profits, Apple, beat analyst estimates of iPhones shipments in its Q2 in May, despite an earlier miss in the holiday quarter — showing the staying power of its high end smartphone brand and a positive, if slow burn, response to how it’s iterating its mobile business, with the iPhone X.

Returning to Samsung, the positive story for the company — continued record growth for its chip business — is still not filling the smartphone-shaped profit hole in its books, even as restarting momentum in the smartphone segment is looking increasingly tough in a very tough market

The Galaxy S9 is a solid smartphone but serving up more of the same equals diminishing returns in the fiercely competitive Android space. And investors look circumspect, with shares in Samsung down around 12% this year.

One wild card on the device innovation front: Samsung has been teasing its R&D work to build a foldable smartphone for multiple years. Ahead of Apple’s iPhone X flagship launch last year Samsung suggested it was targeting 2018 to finally release a product.

However this is also a risky strategy given the obvious manufacturing challenges, and — beyond that — question marks over whether a foldable smartphone is really the type of mainstream innovation that could fire up major momentum among high end handset buyers or be viewed as a niche gimmick.

 

Bixby creeps toward usefulness with sports news from theScore

It’s certainly understandable that Samsung wanted to follow Apple, Amazon and Google into the smart assistant game. But Bixby has been anything but a rousing success. The AI has added voice functionality and a smattering of features in subsequent releases, including the S9’s Google Lens-style capabilities, but it’s yet to live up to its full potential. 

Today, theScore announced that it’s bringing live sports scores and news from the gamut of top sports leagues, including the NBA, MLB, NFL, NHL and EPL soccer, starting next month. In August, the feature will arrive in Bixby Home, bringing with it customizable notifications based on sports or specific teams.

It’s a small addition in the larger scope of what these assistants have to offer, but I know that regular sports scores are one of my most frequently used features on Google Assistant and Alexa — especially as someone who lives outside all of my teams’ broadcast range.

Third-party functionality was one of Samsung’s primary Bixby selling points since launch, leaving the heavy lifting up to third parties who specialized in such things. Of course, Bixby’s failed to catch fire, even as the company has gone out of its way to make it front and center through things like a devoted button on the Galaxy S9 and Note 8.

With the Note 9’s arrival just around the corner, perhaps Samsung will have more to show on that front next month.

Next iPhone could be available in grey, white, blue, red and orange

According to a supply chain report, Apple is preparing to release three iPhone lines this fall. One, a 5.8-inch iPhone X with improved specs and lower price. Two, a new 6.5-inch iPhone X Plus with an OLED screen. And three, a 6.1-inch iPhone with Face ID, which is said to come in a variety of colors including grey, white, blue, red and orange.

Ming-Chi Kuo reports, via 9to5mac, that the 6.5-inch iPhone X Plus is said to take the $1000 price point from the iPhone X. This will cause the next iPhone X to be less expensive than its current incarnation. The colorful 6.1-inch iPhone will be the least expensive model with a price tag around $700. Information about storage was not included in the report.

The least-expensive iPhone is said to resemble the iPhone X and include FaceID though Apple might concede the dual-camera option to the higher price models. The analyst expects this $700 option to account for 55% of new iPhone sales and increase through 2019.

If the part about the colors is correct, Apple is set introduce a slash of color to the monochrome phone market. Currently, phones are mostly available in greys and blacks with most vendors offering a couple color options through special editions. That’s boring. Apple tried this in the past with its budget-minded iPhone 5c. Making its best-selling model available in colors is a distinct shift in strategy. It’s highly likely other firms such as Samsung and LG will follow the trend and push the smartphone world into a rainbow of colors.

India’s Cashify raises $12M for its second-hand smartphone business

Cashify, a company that buys and sells used smartphones, is the latest India startup to raise capital from Chinese investors after it announced a $12 million Series C round.

Chinese funds CDH Investments and Morningside led the round which included participation from Aihuishou, a China-based startup that sells used electronics in a similar way to Cashify and has raised over $120 million. Existing investors including Bessemer Ventures and Shunwei also took part in the round.

This new capital takes Cashify to $19 million raised to date.

The business was started in 2013 by co-founders Mandeep Manocha (CEO), Nakul Kumar (COO) and Amit Sethi (CFO) initially as ‘ReGlobe.’ The business gives consumers a fast way to sell their existing electronics, it deals mainly in smartphones but also takes laptops, consoles, TVs and tablets.

“When we began we saw a lot of transaction for phone sales moving from offline to online,” Manocha told TechCrunch in an interview. “But consumer-to-consumer [for used devices] is highly opaque on price discovery and you never know if you’re making the right decision on price and whether the transaction will take place in the timeframe.”

These days, the company estimates that the average upgrade cycle has shifted from 20 months to 12 months, and now it is doubling down.

With Cashify, sellers simply fill out some details online about their device, then Cashify dispatches a representative who comes to their house to perform diagnostic checks and gives them cash for the device that day. The startup also offers an app which automatically carries out the checks — for example ensuring the camera, Bluetooth module, etc all work — and offers a higher cash payment for the user since Cashify uses fewer resources.

 

A sample of the Cashify Q&A for selling a device.

Beyond its website and app, Cashify gets devices from trade-in programs for Samsung, Xiaomi and Apple in India, as well as e-commerce companies like Flipkart, Amazon and Paytm Mall.

Used device acquired, what happens next is interesting.

The startup has built out a network of offline merchants who specialize in selling used phones. Each phone it acquires is then sold (perhaps after minor refurbishments) to that network, so it might pop up for sale anywhere in India.

With this new money, Cashify CEO Manocha said the company will develop an online resale site that will allow anyone to buy a used phone from the company’s network. Devices sold by Cashify online will be refurbished with new parts where needed, and they’ll include a box and six-month warranty to give a better consumer experience, Manocha added.

Today, Cashify claims to handle 100,000 smartphones a month, but it is planning to grow that to 200,000 by the end of this year. Cashify said its devices are typically low-end, those that retail for sub-$300 when new. A large part of that push comes from the online site, but the startup is also enlarging its offline merchant network and working to reach more consumers who are actually selling their device. That’s where Manocha said he sees particular value in working with Aihuishou.

Cashify is also developing other services. It recently started offering at-home repairs for customers and Manocha said that adding Chinese investors — and Aihuishou in particular — will help it with its sourcing of components for the repairs service and general refurbishments.

Cashify estimates that the used smartphone market in India will see 90 million phones sold this year, with as many as 120 million trading by 2020. That’s close to the 124 million shipments that analysts estimate India saw in 2017, but with surprisingly higher margins.

A reseller can make 10 percent profit on a device, Manocha explained, and Cashify’s own price elasticity — the difference between what it buys from consumers at and what it sells to resellers for — is typically 30-35 percent, he added. That’s more than most OEMs, but that doesn’t take into account costs on the Cashify side which bring that number down.

“When I sell to a reseller, the margins aren’t that exciting which is why we want to sell direct to consumers,” the Cashify CEO said.

The startup has plenty going on at home in India, but already it is considering overseas possibilities.

“We will focus on India for at least next 12 months but we have had discussions on markets that would make sense to enter,” Manocha, explaining that the Middle East and Southeast Asia are early frontrunners.

“We are working very closely with one of the Chinese players and figuring out if we can do some business in Hong Kong because that’s the hub for second-hand phones in this part of the world,” he added.

Samsung will probably unveil the Note 9 on August 9

Those Galaxy Note 9 rumors have been coming fast and furious in recent weeks, and now we know why. Samsung just sent out invites for its next big event in New York City, and its beloved phablet seems all but guaranteed to show up. The timeframe certainly lines up.

The pen-enabled device was first announced at IFA back in 2011, and while the company has moved away from the trade show toward its own stage in recent years, announcements have more or less stayed within that August/September timeframe. And holding the event on August 9, well, that’s likely more than just a numerological coincidence. As if all that weren’t confirmation enough, the handset appears to have also recently passed through the FCC (alongside theTab S3 tablet), a surefire sign that it’s just over the horizon.

The phone was the subject of a big leak earlier this week, that hinted at an update to line’s iconic S Pen stylus. Exact details are pretty thin at the moment, though one leaker called it “the biggest update” in the peripheral’s history, for what that’s worth. And the close up shot on this morning’s invites do appear to confirm a focus on the stylus. Samsung has refined the S Pen’s writing system in the seven years since the first device was announced, but it’s largely taken a backset to things like screen design and camera specs.

Otherwise, however, Note 9 reports paint a picture of fairly minor upgrades over the Note 8, with plenty of features cribbed from the S9 announced back in February at Mobile World Congress.

 

 

 

Israeli autonomous technology developer Innoviz is entering China’s car market

Innoviz, a developer of light detection and ranging technologies for computer vision and autonomous vehicles, is getting a toehold in China, the world’s fastest growing auto market, through a partnership with the Chinese automotive supplier HiRain Technologies.

From offices in Beijing, Chicago, Detroit, Shanghai, Tianjin HiRain serves as a global supplier to some of China’s largest automakers and has already been a gateway to success for another Israeli company developing sensing technology for vehicle manufacturers — Mobileye .

That company has half of its business coming from China and has won 9 of its supplier agreements with different automakers in the country through its HiRain partnership, according to people with knowledge of the company.

For the three year old Innoviz, the opportunity to expand its list of suppliers to include one of China’s leaders was too good of an opportunity to pass up, said chief executive officer Omer Keilaf.

“China is helping lead the way towards the autonomous vehicle future, and HiRain is one of the most influential companies in the Chinese automotive industry. Last year, around 26 million vehicles were manufactured in China, making it by far the largest automotive manufacturing country in the world,” said Keilaf, in a statement. “The HiRain team has extensive experience with driver assistance and autonomous driving systems in China and we are honored to partner with them.”

It’s the latest in a series of strategic moves for Innoviz, which already counts Aptiv, Magna International and Samsung as its partners for supplying automakers in the U.S., Europe and other international markets. The company had its first win with BMW earlier this year, and will be providing LiDAR for the automakers autonomous vehicles in 2021.

“LiDAR is one of the most critical technologies for automated driving systems, and we partnered with Innoviz because not only is its technology more advanced than other LiDAR solution, but the company has proven it can deliver on its promises,” said Yingcun Ji, the chief executive of HiRain, in a statement. “Innoviz’s cutting-edge LiDAR will help us expand our leadership position within the Chinese automotive industry and continue to blaze a trail towards the autonomous driving future.”

The opportunity to expand driverless vehicle technologies in China extends far beyond the country’s established automakers like SAIC Motors, Chang’an Motors, FAW Group and Dongfeng Motor or more recent upstarts like Geely and BYD . Technology companies including Tencent, Alibaba, and Baidu all have an interest in developing autonomous vehicles, and new electric car companies like Byton, Nio, WM Motor, and Xiaopeng Motors. Some of these new companies are counting on government subsidies of $8,400 per vehicle, to bring electric, autonomous technology to China’s congested and polluted streets.

Behind HiRain and its OEM relationships, Keilaf said there were as many as 20 other development programs that the company was exposed to in China.

“We are going to sell the LiDAR in this collaboration that will let us get to the volume to drive our process and get early revenues,” Keilaf said.

When it comes to autonomous vehicle standards, China is racing ahead, said Keilaf. The country wants to get to Level 3 autonomy in most of its vehicles by 2020 and level 4 autonomy in 2021.

As for other markets, like the U.S., Keilaf said the development of autonomous vehicles will continue to happen quickly, but in very specific markets. And that the growth wouldn’t be hindered by recent fatalities caused by failures in autonomous vehicle systems from Uber and Tesla (two companies that have been aggressively pushing driverless vehicle programs).

“It makes everybody understand better what is needed to make things the right way,” Keilaf said of the accidents. “The way I see it, autonomous driving will come soon. But autonomous driving is a very big term.”

For Keilaf, autonomy is going to appear in markets like the U.S. first in specific applications like shuttles around colleges, airports, or closed communities. Simultaneously some advanced autonomous technologies will take to the roads in the form of long haul convoys for shipping and logistics, and finally in industrial applications for agriculture and mining.

Founded in early 2016, Innoviz has over 150 employees worldwide and is backed by $82 million in venture funding.

Jury finds Samsung owes Apple $539M in patent case stretching back to 2011

A patent case that began back in 2011 has reached a conclusion, with Samsung ordered to pay about $539 million to Apple over infringements of the latter’s patents in devices that are now long gone. The case has dragged on for years as both sides argued about the finer points of how much was owed per device, what could be deducted and so on. It’s been eye-wateringly boring, but at least it’s over now. Maybe.

The patents in question are some things we take for granted now, UI cues like “rubber-banding” at the bottom of a list or using two fingers to zoom in and out. But they were all part of the “boy have we patented it” multi-touch gestures of which Steve Jobs was so proud. In addition there were the defining characteristics of the first iPhone, now familiar (black round rectangle with a big screen, etc.). At any rate, Apple sued the dickens out of Samsung over them.

The case was actually decided long ago — in 2012, when the court found that Samsung had clearly and willfully infringed on the patents in question and initial damages were set at a staggering $1 billion. We wrote it up then, when it was of course big news:

Since then it’s all been about the damages, and Samsung won a big victory in the Supreme court that said it only had to pay out based on the profit from the infringing component.

Unfortunately for Samsung, the “infringing component” for the design patents seems to have been considered by the jury as being the entire phone. The result is that a great deal of Samsung’s profits from selling the infringing devices ended up composing the damages. It sets a major precedent in the patent litigation world, although not necessarily a logical one. People started arguing about the validity and value of design patents a long time ago and they haven’t stopped yet.

CNET has a good rundown for anyone curious about the specifics. Notably, Samsung said in a statement that “We will consider all options to obtain an outcome that does not hinder creativity and fair competition for all companies and consumers.” Does that mean they’re going to take it as high as the Supreme Court (again) and drag the case out for another couple of years? Or will they cut their losses and just be happy to stop paying the legal fees that probably rivaled the damages assigned? Hopefully the latter.

Samsung adds ‘The Incredibles’ to its AR Emojis

Samsung’s AR Emojis were met with a…lukewarm reception when they launched alongside the Galaxy S9. The augmented reality avatars were regarded as a me-too response to Apple’s Animojis — and more to the point, were downright creepy.

But at launch, the company brought one key element to the offering that Apple hasn’t: a content partnership. And not just any content partnership, mind. A Disney content partnership. So far, it’s rolled out the iconic likes of Mickey, Minnie and Donald, and now, just in time for the latest Pixar sequel, it’s offering up the cast of The Incredibles 2.

Starting today, Galaxy S9 and S9+ owners can download  Mr. Incredible, Elastigirl, Violet, Dash, Jack-Jack and new character Frozone, for all of their AR Emoji-related needs. So users can send a birthday greeting, reach out to a loved one or break up with an ex as their favorite super baby.

The new content pack is available directly through the camera software’s built-in AR Emoji mode. The tech uses in excess of 100 facial features to map the user’s movements.

The Skagen Falster is a high fashion Android wearable

Skagen is a well-know maker of thin and uniquely Danish watches. Founded in 1989, the company is now part of the Fossil group and, as such, has begin dabbling in both the analog with the Hagen and now Android Wear with the Falster. The Falster is unique in that it stuffs all of the power of a standard Android Wear device into a watch that mimics the chromed aesthetic of Skagen’s austere design while offering just enough features to make you a fashionable smartwatch wearer.

The Falster, which costs $275 and is available now, has a fully round digital OLED face which means you can read the time at all times. When the watch wakes up you can see an ultra bright white on black time-telling color scheme and then tap the crown to jump into the various features including Android Fit and the always clever Translate feature that lets you record a sentence and then show it the person in front of you.

You can buy it with a leather or metal band and the mesh steel model costs $20 extra.

Sadly, in order stuff the electronics into such a small case, Skagen did away with GPS, LTE connectivity, and even a heart-rate monitor. In other words if you were expecting a workout companion then the Falster isn’t the Android you’re looking for. However, if you’re looking for a bare-bones fashion smartwatch, Skagen ticks all the boxes.

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What you get from the Flasterou do get, however, is a low-cost, high-style Android Wear watch with most of the trimmings. I’ve worn this watch off and on few a few weeks now and, although I do definitely miss the heart rate monitor for workouts, the fact that this thing looks and acts like a normal watch 99% of the time makes it quite interesting. If obvious brand recognition nee ostentation are your goal, the Apple Watch or any of the Samsung Gear line are more your style. This watch, made by a company famous for its Danish understatement, offers the opposite of that.

Skagen offers a few very basic watch faces with the Skagen branding at various points on the dial. I particularly like the list face which includes world time or temperature in various spots around the world, offering you an at-a-glance view of timezones. Like most Android Wear systems you can change the display by pressing and holding on the face.

It lasts about a day on one charge although busy days may run down the battery sooner as notifications flood the screen. The notification system – essentially a little icon that appears over the watch face – sometimes fails and instead shows a baffling grey square. This is the single annoyance I noticed, UI-wise, when it came to the Falster. It works with both Android smartphones and iOS.

What this watch boils down to is an improved fitness tracker and notification system. If you’re wearing, say, a Fitbit, something like the Skagen Falster offers a superior experience in a very chic package. Because the watch is fairly compact (at 42mm I won’t say it’s small but it would work on a thinner wrist) it takes away a lot of the bulk of other smartwatches and, more important, doesn’t look like a smartwatch. Those of use who don’t want to look like we’re wearing robotic egg sacs on our wrists will enjoy that aspect of Skagen’s effort, even without all the trimmings we expect from a modern smartwatch.

Skagen, like so many other watch manufacturers, decided if it couldn’t been the digital revolution it would join it. The result is the Falster and, to a lesser degree, their analog collections. Whether or not traditional watchmakers will survive the 21st century is still up in the air but, as evidenced by this handsome and well-made watch, they’re at least giving it the old Danish try.

VR, presence and the case of the missing killer app

Compelling virtual reality shipped to developers and consumers nearly two years ago. The first flagship headsets arrived from Oculus and HTC back in the spring of 2016, offering enough resolution, frame rate, field of view, latency mitigation and position-tracking to produce believable visual immersion.

But no one seems to know what to do with it. To date, no killer app has extended the promise of VR from a novelty to a sticky experience or utility that reaches beyond enthusiasts to resonate with the consumer center of mass.

This isn’t to say that great experiences don’t exist. Apps like Tilt Brush, Elite: Dangerous and Google Earth VR have earned rave reviews and plaudits from enthusiasts. But we have yet to see a household phenomenon like Halo or Lotus 1-2-3 — applications that single-handedly propelled their respective platforms to wide use. At CES 2018, one industry analyst referred to VR as “drawerware,” referring to the likelihood of headsets to be stuffed in a drawer after a few forays into jejune worlds.

In an attempt to shed some light on the case of the missing VR killer app, I want to offer a few thoughts on why VR matters to users, and what that implies for entrepreneurs and investors interested in building or funding the VR killer app.

Why VR matters: Presence

Why is virtual reality valuable? In a word, presence: Immersion is the heart of the incremental value of VR versus existing platforms. Most forms of expressive media provide a third-person perspective of an experience, or convey sufficient information to help a user imagine a first-person perspective on their own.

When done right (6DoF tracking, room-scale movement, sufficiently high-resolution/FOV/low latency, spatial audio), virtual reality helps a user feel like they are really there. Rather than convey an impression of an experience, VR manipulates our visual and auditory senses (and soon our tactile sense) to transmit experience itself.

Presence is valuable in two ways

The idea that VR is valuable because it generates presence is well understood. But why does presence matter? What need does being there fill for users?

The quality of presence has clear intrinsic value. With few exceptions, subjective immersion is the best way to fully grasp what a certain experience is like. Being at the mountaintop generates the maximum degree of sensory throughput, and is a better way to understand the truth of your relationship to that place than watching a video of the mountain, which is better than seeing a picture of the mountain.

The objective fact of being somewhere matters as much or more than the subjective feeling of being there.

But presence also can have instrumental value, where being there is valuable in an objective sense. Being present at a meeting with a potential business partner sends a positive signal separate from the fidelity of your experience. Actually visiting the mountaintop can impress your friends, mattering beyond the sensation of being there.

Put another way, and borrowing the language of philosophy, it seems like we value presence for its experiential worth — being for the sake of experience — as well as for its ontological worth, or being for the sake of being. Another way to describe the ontological value of presence is authenticity. The philosopher Robert Nozick suggested as much in his refutation of ethical hedonism, employing the notion of the “experience machine” to suggest we care about more than our feelings. What this all means is that for many kinds of experience, the objective fact of being somewhere matters as much or more than the subjective feeling of being there.

VR’s killer app will deliver both types of presence value

How does identifying the two ways that presence drives user value help us imagine the use case that a VR killer app might address?

First, it illuminates why many first-order VR applications may not be suited for adoption by a non-enthusiast audience. When examining some of the typical mass market use cases forwarded by VR aficionados — enterprise or personal telepresence, virtual tourism and travel, virtual attendance at sports and entertainment events, virtual social environments and rec rooms — it seems clear that authenticity matters a great deal to consumers of these experiences, meaning that simply porting them to VR may not be compelling beyond an initial sense of novelty.

I believe that the value of ontological presence is largely driven by social norms. As and when the quality of VR experience converges on metaphysically “real” experience, those norms will evolve. Perhaps our children will label us “substratist” for claiming that hanging out in VR is less satisfying than visiting in person. But with regards to the next generation or two of VR tech and applications, I’m not bullish on social VR experiences that merely replicate the ways we interact in real life. By generating experiential presence without authenticity, they seem to fall into an uncanny valley somewhere between interactive video chat and in-person interaction.

It’s tempting to believe, then, that the VR killer app will skirt the issue of authenticity by solving for problems where the subjective feeling of presence, and not the objective fact of it, matters most — for example, virtual training for a factory worker, touring new construction homes for sale or checking out a car in a virtual showroom. VR is already finding fruitful use in the enterprise and select consumer applications. But when considering potential killer applications, the problem is that arenas of experience where experiential presence matters but authenticity does not usually aren’t important or frequently accessed parts of our life.

Ultimately, I think the first VR blockbuster will deliver both the experiential and ontological value of presence. In other words, VR’s killer app will generate a powerful feeling of being there for a compelling experience, in a way that also feels completely authentic.

Quality, accessibility and ecosystem maturity are probably the biggest practical barriers gating the VR killer app.

I believe that the experience in question will lack an analogue in the real world. In other words, the VR killer app won’t be a multiplayer simulation of New York City in the present day, or a virtual movie theater, or a virtual Giants Stadium where you can kick back in a box and watch the Super Bowl. The application that sells the mass market on virtual reality will be fully native to the platform, such that the only way to know what it is really like will be donning a headset and stepping inside.

An engaging VR experience that isn’t simulating something in the real world, but exists solely in its own right, can immerse a user in both senses of the word: After all, authenticity is implied when the virtual substrate is the only home for a certain experience. The real question is making the experience interesting or fun or cool enough that the feeling of presence is appealing, too.

Concluding thoughts

If it sounds like I’m describing a video game, I think I am, too. But video games are a focal use case for every VR headset in production. What’s missing?

Quality, accessibility and ecosystem maturity are probably the biggest practical barriers gating the VR killer app. The current generation of flagship headsets are cumbersome and expensive to set up and run. Though deep price cuts across flagship wearables powered sales of more than a million VR headsets in Q3 2017, and both Oculus and HTC moved hundreds of thousands of high-end, PC-based units, individual install bases remain low enough to deter AAA studios.

Bootstrapping a two-sided ecosystem — in the case of VR, headsets/users and content, with more of the former increasing the incentive to invest in the latter and vice versa — is never easy. But better technology is on the way: HTC recently announced the Vive Pro, sporting improved resolution, spatial audio and a wireless adapter to do away with clunky wires. Google, Samsung, Lenovo and Oculus are working on standalone headsets that run without a PC or smartphone under the hood. Dozens of startups are developing peripherals and software to improve the VR experience, from haptics that mimic touch to pupil tracking that enables realistic eye contact.

Each new iteration of core VR hardware is a rising tide that makes any VR application more appealing to users on the margin. But killer apps often emerge on imperfect versions of the platforms they bring to life. The charting function of Lotus 1-2-3 strained the limits of the early graphics hardware on x86 PCs, but until 1-2-3, no one knew that programmatic generation of charts and graphs was even possible.

A killer app doesn’t need to be a perfect encapsulation of a new technology’s potential. All it needs to do is hint at the grand vision by providing a single, irresistible demonstration of value over the status quo.

In the case of VR, I’m not certain if that demonstration will occur on this generation of hardware or the next. But I believe it will be an experience that compares in intensity or joy or uniqueness to the best experiences we can access in reality. If you’re working on VR content or applications, consider this advice: Give us the ability to be present in a vision of the past, or a counterfactual world. Give us the feeling of life underwater or in space. Give us the sense of being present for an experience completely native to virtual reality, not merely an emulation of experiences we can already inhabit. Give us something real in its own right. That’s when the mass market will start to believe — and buy.